Would I get a mortgage?

[Calico]

Hi All,

This is probably one for any brokers on the site. I know a definitive answer isn't possible and I should speak to a bank. I'm just looking for a general idea before I embark on that process. Basically, I have a property and some cash, but earn a low salary and am wondering what kind of mortgage I could potentially qualify for (if any).

Cash - c.€100k (this was an inheritence)
Apartment (also inherited) - guestimate value €120k (bought in 2004 for €235k, so maybe less?) There is no mortgage on this. Similar apartments in the area currently rent for €500 per month
Income- €27k (full time, employed with the same employer for the past 4 years)

My goal is to buy a property in Dublin where I work using the assets above. (I am currently commuting). I don't have a savings record as most of my spare cash goes on petrol, but I think once this ended, I could afford repayments from my salary of about €500 per month. My intention would be to put the apartment up as security (and rent it out), and use the cash as a deposit. The rest I would borrow on the strength of my salary (which is low I know, esp for my age (mid 30s) - this more a personal choice to do what I do rather than an inability to get a higher-paying job.) I would also plan to rent a room in any house I bought. I have first-time buyer status.

Is this feasible given my circumstances, or would the low salary and current lack of disposable income rule me out? I would have thought between the rent that I could get from my apartment, renting a room, and my own salary, I could safely make a mortgage repayment of €1200 a month (€400+€400+€400). This would be on top of using the about 100k as a deposit (or at least most of it). However, I know we are living in a different environment now in relation to getting mortgages, so I may be wasting my time.

Any advice appreciated,

Cali


edit. The sort of houses I would be interested in purchasing would be 2/3 bedrooms, in the €300/350k bracket...

 

[Slim]

Hi Cali,

I am not a mortgage expert by any means. I was wondering if you would consider (a) renting out your apartment and (b) renting an apartment in Dublin for a while. This would enable you to get a feel for Dublin city living and keep your cash in hand. my niece has rented a nice apartment in Grand Canal Docks area for about €1,200 pm and has sublet a room to cover half that. If you can store your stuff somewhere, the rent of your apartment and the lodger will see you living near work and saving commute expenses. It's just that things are so uncertain, I would be loathe to sink €100k into a property plus mortgage at the moment.

 

[callybags]

The first thing that occurred to me is that you have no mortgage on your existing apartment.

If it is fairly new and in good repair, you won't have much expenses to set off against the rental income for tax purposes.

The projected rental income of €6,000 could effectively be reduced to 3.5-4K depending on your marginal rate of tax.

 

[Calico]

Hi Cali,

I am not a mortgage expert by any means. I was wondering if you would consider (a) renting out your apartment and (b) renting an apartment in Dublin for a while. This would enable you to get a feel for Dublin city living and keep your cash in hand. my niece has rented a nice apartment in Grand Canal Docks area for about €1,200 pm and has sublet a room to cover half that. If you can store your stuff somewhere, the rent of your apartment and the lodger will see you living near work and saving commute expenses. It's just that things are so uncertain, I would be loathe to sink €100k into a property plus mortgage at the moment.

Thanks Slim.....that is sort of my feeling too. I actually did live in Dub but moved back as I thought it made economic sense. It does, but the commute is wearing me down. 2012 being the last year for mortgage interest relief for first time buyers has made me a bit keener to try and get on the dublin property ladder too. I think a lot of people might be thinking the same which could in turn translate into prices going up again.

Callybags - that is a good point, thank you.

 

[Jim2007]

Conservative financial advice would suggest that borrow more than two and a half to three times your annual salary is unwise and given the current circumstances it is something well worth considering. Assuming you'd clear 4K on rental income, that would suggest that your high water mark for borrowing should be around 100K!

This tends to the rule of thumb operated by mainland European banks and as we move towards tighter integration of the Eurozone, I would expect to see similar rules becoming the norm here once again - as it did before the tiger.

 

[oldnick]

It's wise for you to consider a house rather than an apt even though you can get great aparts in Dublin city centre at very low prices.
As you know ,houses have retained their value far better than apts and banks lend more easily on houses. (If you were an investor looking for a good annual return I'd say get an apt, but you want a home).

However, I can't see any bank lending you 200k even with 100k cash deposit and an apartment as security. Jim 2007 is right- things have changed and anything above 100k would be surprisingly kind of the bank.

So sell the apartment.
(I'm surprised that you reckon you may sell for 125 k yet the gross rent is only 6k p.a.- less than 5k after costs. Even 100k seems too dear for such a low yield, even outside Dublin. I get 400 a month from an apt in Dundalk -but i can't sell it for 50k).

With 100k cash, the proceeds from the apt, and a mortgage of 100k you could get a reasonable 3 bedroom house for 260-280k in many suburbs of Dublin - and rent out the two rooms at 10.000 a year tax-free to two nice Polish girls !